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This article contains false statements of fact. For the correct facts, click here:
https://www.gov.sg/article/factually141022-b.
“A rather disingenuous and misleading analysis of the supposed $270mn loss made by HDB and by inference the government in developing BTO flats in AMK imho.” writes former GIC economist.
This was said by Mr Yeoh Lam Keong in a Facebook post on Tuesday (4 Oct) following news of the clarification made by Singapore Minister of National Development, Desmond Lee about how the Housing and Development Board (HDB) will incur an estimated development loss of about S$270 million from the Central Weave @ Ang Mo Kio Build-to-Order (BTO) project.
Mr Lee was responding to the parliament question filed by Non-Constituency Member of Parliament (NCMP) Leong Mun Wai on the questions of HDB’s net loss for the Central Weave BTO project at Ang Mo Kio; cost of land paid by HDB to SLA for this project; and net profit and loss position for the Government, including HDB and SLA, for this project.
Mr Lee said that the estimated development loss of about S$250 million for the project would increase to about S$270 million after considering the Central Provident Fund (CPF) housing grants given to eligible buyers.
He added that the estimated land cost for the project was S$500 million, determined independently by the chief valuer using market valuation principles.
“Land forms part of the past reserves, hence when HDB uses the land for development, the money that HDB will need to pay for the land must be paid back into the past reserves, which are invested and grown for future generations and are protected,” said Mr Lee.
The Minster emphasised that the Singapore government cannot use proceeds from land sales as revenue for spending in the budget and that HDB does not price new flats based on cost.
“HDB first establishes their market value by considering the prices of comparable resale flats nearby as well as the individual attributes of the flats and prevailing market conditions,” said Mr Lee.
“To derive the selling prices, HDB applies a significant subsidy to the assessed market values to ensure that new flats are affordable to those buying their first home.”
Mr Lee stressed that HDB incurs a “significant” deficit every year as the amount it collects from the sale of flats is “far less” than the cost of building and housing grant disbursements.
What sparked off Mr Leong’s parliament question might have been the recent Protection from Online Falsehoods and Manipulation Act (POFMA) correction direction issued by Mr Lee on Alternative View, a local social media page, for suggesting that HDB profited from the sale of the AMK BTO flats.
True Cost To The Government On BTO Projects After Subsidies Should Be Clearer
Commenting on the claimed loss by HDB, Mr Yeoh who worked in the Singapore’s sovereign wealth fund for 26 years said that the accounting sleight of hand being that the government acquired most of the land at minimal or much lower cost by compulsory acquisition.
He said that the advertised loss is only the opportunity cost of the state reselling the land at market price which it has psssed on to HDB, hence the “loss”.
Mr Yeoh argued that the true cost price should be the original book value of the land plus construction costs which on average is probably much lower than BTO prices before subsidy.
“The opportunity cost to the government of current higher land values should rightly go to HDB buyers to be true to the government and HDBs original mandate of affordable housing for all.”
He proposed that a more equitable, transparent and affordable way to price BTO flats should be factoring in construction costs plus a small premium for location available by ballot.
“If prices are much lower than resale flats then a longer minimum occupation period ( MOP) can be used to protect the market value of resale flats especially in prime locations as already the case.” said Mr Yeoh.
“The true cost to the government after subsidies will then be much clearer and BTO flats in all locations much more fairly affordable.”
Reform Of HDB Flat Pricing Needed; Singaporeans Channeling Significant Part Of Income To Pay Off HDB Flat
Mr Yeoh along with a few others at Future of Singapore, a non-partisan group submitted a proposal for a reform of the Singapore public housing policy in 2019.
On cost for new HDB flats, the group proposed that all new BTO flats be sold at around construction cost of $150-200 per square foot. Such flats will not be eligible for sale in the resale market for the first 15 years to help effectively safeguard the price of current resale flats. One family can only own one such flat at a time. Flat owners older than age 65 should also be allowed the option to downgrade once to a smaller, low cost BTO flat to further boost retirement adequacy.
The group noted in their proposal that the current cost of HDB flats for first time buyers of BTO flats relative to their incomes is very high, with the result that it typically takes about 25 years for home buyers to pay off their housing loans.
This effectively means that for the greater part of their working lives, many Singaporeans are channelling a significant part of their disposable incomes to paying off their HDB flats, leaving insufficient savings for retirement, medical expenses and education upgrading. The problem is exacerbated for the lower, irregular or uncertain incomes that makes home ownership difficult.
